Reporting and Documentation

Credit unions should maintain documentation of, and support for, all significant assumptions, including yield curve rates, spreads, deposit modeling, and NMS rates. This documentation should be available to examiners.

Management should understand and use IRR measurement system results in the normal course of business (for example, to make operational decisions about the balance sheet structure, funding, pricing strategies, and business planning). Management should also use the results proactively as a tool to adjust exposure to IRR for changes in interest rate environments (such as when measures show a high level of IRR or when measurement results approach board-approved limits).

Measurement systems should produce summary reports detailing key model assumptions, including a change log identifying the staff member associated with each entry, and all other data input relevant to support the valuations for base and stressed scenarios. Examiners review a copy of these reports when analyzing a measurement system. Report output organization, in term of account aggregation, may be different than the level of data input. For example, a fixed-rate mortgage line on a report may require assumptions at each of the types of fixed-rate mortgage as data input into the model.

Most vendor management systems offer an array of summary reports (such as a chart of accounts and account attribute reports) that aid management in reviewing measurement system assumptions. These reports may also provide information regarding the contractual terms and parameters that have been entered into the system for various account types and products.

Assumption summary reports are an important tool that management and examiners can use to validate that the measurement system is relying on reasonable assumptions. The reports can also be useful to examiners when management does not maintain adequate documentation of current assumptions. For example, when assumption summary reports are regularly produced and retained, examiners can compare current assumptions against historical assumption reports.

If a credit union is unable to provide assumption and market data reports, examiners should determine whether the absence of the report is due to measurement system limitations or credit union personnel’s lack of familiarity with system reporting. Typically, measurement system user manuals will provide a list of reports the system can generate.

The measurement systems should produce reports to support the IRR strategy for ongoing monitoring and decision making. At a minimum, the system should have reporting capabilities to support:

• Current risk metrics to compare to policy limits

• Summary of key assumptions and data inputs

• All stress testing results

Last updated on December 06, 2024